Accounting For Amalgamation (As Per As-14)

12/9/2016
AccountingforAmalgamation(asperAS14)
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AccountingforAmalgamation(asper
AS14)
In general meaning Amalgamation implies
blendingoftwoormoreexistingentitiesinto
one, during the blending process blended
entities losing their identities and forming
intooneseparatelegalentityhavingitssole
identity.Amalgamationcouldbedoneeither
bythetransferoftwoormoreexistingentitytonewentityorbythetransferofoneormore
undertakingtoanexistingcompany.
This standard deals with accounting for amalgamation and the treatment of goodwill or
reserves and AS14 includes the direction for amalgamation of companies although its
some of the provisions also applies to other entities. It is important to understand the
differencebetweenthewordAmalgamationandAcquisition.
There are two methods of amalgamation viz. Amalgamation in the nature of
PurchaseandAmalgamationinthenatureofmerger.
Acquisition includes the purchase of whole or part of the shares or whole or part of the
assetsofanothercompanyinconsiderationofcashorthepaymentbywayofissuingthe
securitiesorpartlybyonemethodandpartlybyothermethod.Thedistinguishingfeature
oftheacquisitionisthatduringthisprocessthecompanywhoisacquireddoesnotlossits
existenceasseparateentity.
NOTE that the standards of accounting of amalgamation do not apply to the rules of
acquisition.
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DEFINITION:
SHARETHIS(/includes/share_inc_more.asp?
mod_id=25966&module_name=articles&share_title2=AccountingforAmalgamation(asperAS
TRANSFERORCOMPANY:Companywhichisamalgamatedintoanothercompany.
14)&share_url2=http%3A%2F%2Fwww%2Ecaclubindia%2Ecom%2Farticles%2Faccounting%2Dfor%2Dama
TRANSFREECOMPANY:Acompanyintowhichatransferorcompanyisamalgamated.
RESERVE:Itisthatportionofearning,receiptorotherincomesoftheenterprisewhichis
attributabletosomegeneralorspecificpurposeotherthanprovisionfordepreciation.
AMALGAMATION IN THE NATURE OF MERGER: If it satisfies all the conditions
mentionedbelow:
Alltheassetsandliabilitiesofthetransferorbecometheassetsandliabilitiesofthe
transferee,afteramalgamation.
Notlessthan90%oftheequityshareholderagreestobecometheshareholdersof
thetransfereecompany.
Considerationfortheequityshareholdersofthetransferorcompanywhoagreesto
becometheshareholdersofthetransfereecompanyisdischargedwhollythroughthe
paymentbywayofissueofequitysharesorothersecuritiesoracombinationofboth,
onlythefractionofthesharecouldbepaidbywayofcash.
Businessofthetransferorcompanyisintendedtobecarriedout,afteramalgamation
bythetransfereecompany
Noadjustmentisintendedtobemadeinthebookvalueoftheassetsandliabilitiesof
thetransferorcompanywhentheyareincludedinthefinancialstatementofthe
transfereecompanyexcepttoensureuniformityintheaccountingpolicies.
AMALGAMATIONINTHENATUREOFPURCHASE:Ifanyoneoftheabovementioned
conditiongetdissatisfied,thensuchamalgamationwillbetreatedastheamalgamationin
thenatureofpurchase.
CONSIDERATION:Anypaymentmadebythetransfereetothetransferorbywayofequity
sharesofthetransfereecompanyoranyothersecurityorbywayofcashorotherassets
bythetransfereecompanytotheshareholdersofthetransferorcompany.
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FAIRVALUE:Fair value is the amount for which a assets could be exchanged between
thetransferorandtransferee.
POOLINGOFINTERESTMETHOD:Thisisamethodofaccountingfortheamalgamation
thepurposeofwhichistoaccountforamalgamationasifTransfereeCompanycontinued
tobeoperatedasseparateentity.Accordingly,onlyminimalchangescanbedoneinthe
financialstatementoftheamalgamatingcompanies.
TREATMENTOFSOMEOFTHEITEMSATTHETIMEOFAMALGAMATION:
S.
No.
PARTICULAR
AMALGAMTION
IN
THE
NATUREOFMERGER
AMALGAMATION
THE
NATURE
IN
OF
PURCHASE
The identity of all other

reserves
shall
not
continue
except
the
statutory reserve, the

The identity of the reserves
shall continue to exist in books
of the transferee company as
they appear in books of the
transferorwhetheritisacapital
reserve,
statutory
reserve,
general reserve, revaluation

reserve.
Reserves which are available
for distribution as dividend
would continue to exist in the
1
RESERVE
books of account in the same
reserve
mentioned
under Income tax act

1961 e.g. development
allowance
investment
reserve,
allowance
reserveetc.
The entry shall be
recordedbydebitingthe
Amalgamation Reserve
Account and crediting
the
relevant
statue
account.
3/9
12/9/2016
manner and for the same
Whentheidentityofthe
purpose as they appear in the reserve is no longer
booksoftransferor.
required to be shown
then the following entry

The difference between the
for recording shall be
share
reversed.
capital
and
other
consideration in the form of

cash and other and the share
In
capitaloftransferorcompanyis
process goodwill shall
tobeadjustedinthereservesin
be
the
consideration is more
financial
statement
of
transferee.
amalgamation
created
if
thanthenetassetvalue
of
the
transferor
company and in other

case the value shall be
negative
resulting
capitalreserve.
The balance of profit and loss
account as appearing in the
BALANCE
2
OF PROFIT
AND
LOSS
ACCOUNT
financial
statement
of
the
transferor company shall be

aggregated
amount
in
of
the
the
similar
transferee
company or else shall be

aggregated
into
The profit and loss

account
balance,
whether debit or credit,

shalldisappear.
general
reservesifany.
WrittenbyRinkuGaur
Rinku07gaur@gmail.com
4/9
12/9/2016
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Accounting For Amalgamation (As Per As-14)

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Home(/) / Articles(/articles/) / Accounts(article_display_list_by_category.asp?cat_id=1)

The identity of all other

statutory reserve, the

general reserve, revaluation

books of account in the same

under Income tax act

manner and for the same

then the following entry

for recording shall be

consideration in the form of

process goodwill shall

company and in other

transferor company shall be

company or else shall be

The profit and loss

whether debit or credit,

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